Home > ECB, EMU Crisis, EMU governance > A First Impression on the EU Summit

A First Impression on the EU Summit

December 9, 2011 Leave a comment Go to comments

The Brussels EU Summit is extremely negative for the decisions that have been taken:

    • We are going to converge towards a “German Europe”, based on fiscal austerity and on compression of domestic demand. The stubbornness in rejecting any role for active macroeconomic policies is scary, especially as we are still engulfed into a crisis that could have been substantially worse, were it not for the stimulus packages of 2009. Just ask a question: where would the EU be, if the rules Germany wants,  were already in place in 2008?
    • The eurozone emerges from the Summit, once again, as the only major economy of the world that does not have a properly functioning central bank. With the support of ECB President Mario Draghi, it was once again made clear that the ECB should and would not act as a lender of last resort.

There will be time to discuss these issues, and to ask where does the EMU go (or does not go)  from here.

Here I want to underline the only positive aspect of the meeting: The (self) exclusion of the UK from the process of further integration. This is seen as dangerous by most commentators. I’d argue that it is the only good news that we got from the sleepless night in Bruxelles.
The European leaders could not afford to emerge from negotiations empty-handed, and this forced them to refuse the British vetoes. For the past 38 years the UK has been constantly pushing on the brakes of European integration, obtaining (should I use the term ‘blackmailing’?) compensations and opt-out clauses for every advance that it reluctantly allowed.
The looming Armageddon gave European leaders the strength to finally break free from this grip.

Europe is finally advancing towards increased cooperation. In the wrong direction, for the reasons recalled above, but it is advancing. It is to be hoped that last night we set a precedent, and that in the future the method of enhanced cooperation will become the norm each time that a country blocks the process for selfish reasons.
I made this point in an interview this morning.

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  1. December 10, 2011 at 12:26 am

    Uk leaving is a double edged sword. If things get worse from here it could backfire and you might see more countries opting for the UK solution. It is very hard to go back to your own people and ask for a new treaty.
    On the other hand, the rule based fiscal policy is the best way to go forward. It will not solve the debt issue but it will set up the framework for future fiscal discipline.
    Unfortunately I do not see how we can get rid of the sovereign debt/banks capital shortage without letting some of them fail and writing some of the debt off. In the end we have to bite the bullet to move forward.

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